2019 (9) TMI 492

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....2.2010, under section 143(3) of the Income-tax Act, 1961 (hereinafter 'the Act'). The Penalty was levied by the Income Tax Officer, 14(2)(1), Mumbai (in short ITO/ AO) for the A.Y. 2008-09 vide order dated 31-07-2015, under section 271(1)(c) r.w. s 274 of the Income-tax Act, 1961 (hereinafter 'the Act'). 2. The only issue in this appeal of assessee is against the order of the CIT(A) confirming the levy of penalty imposed u/s. 271(1)( c) r.w. s 274 of the Act on disallowance of interest expenditure of Rs. 15,28,767/-. For this, the Assessee has raised following effective grounds: - "1. The learned Commissioner of income Tax (Appeals) erred in confirming the levy of penalty of Rs. 4,58,630/- under section 271(1)(c) of the Act. ....

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....tilized for making investments in shares and earning of exempt income. Hence, interest expenses were disallowed by the Assessing Officer u/s. 36(1)(iii) of the Act, 1961. The CIT(A) also dismissed the appeal of assessee and further second appeal filed by the assessee before the ITAT was also dismissed. 4. Before the Assessing Officer during the penalty proceedings and before the CIT(A) and even before us the assessee claimed expenditure on interest was allowable under section 36(1)(iii) of the Act and assessee was under bonafide belief for this claim. The ld. Ld. Counsel for the assessee stated that in any case no doubt the quantum has been affirmed, but the Assessing Officer has made certain adjustments while computing the total income ....

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....ng term business prospects for the group as the group company is engaged in the business of advertising and the investee company is engaged in retail sector. The assessee filed complete details and on perusal of share capital and reserves and surplus in its balance sheet as on 31-03-2008, the same amounting to Rs. 4,91,17,182/- and share capital amounting to Rs. 40,50,600/-. It was claimed that assessee's own funds of the company aggregating to Rs. 5,31,67,782/-. The investment held by the company on which tax free dividend income could possibly receive at the end of the year aggregating to Rs. 3,97,02,807/- and is far lower as compared to the capital employed of Rs. 5,31,67,782/-. In any case, the assessee has declared all the facts relati....

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....ome on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1) ( c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)( c ). That is clearly not the intendment of the Legislature." 8. First of all, we are of the view that the assessee has filed complete particulars of income in respect of claim of expenditure and it is not the case of non-disclosure. Further, the....